WABCO Reports Q4 and Full Year 2012 Results; Delivers Full Year Record Performance Operating Margin Amid Downturn in Key Markets; Provides Guidance for 2013

2013-02-15 06:30 ET - News Release

BRUSSELS, BELGIUM
-- (MARKET WIRE)
-- 02/15/13

WABCO Holdings Inc. (NYSE:WBC) -

-- Q4 2012 sales of $596.5 million, down 7.9 percent in local currencies
and down 11.2 percent in U.S. dollars from a year ago
-- Full year 2012 sales of $2,477.4 million, down 4.8 percent in local
currencies and down 11.3 percent in U.S. dollars from a year ago
-- Q4 2012 operating margin of 12.6 percent on a performance basis, down
from 13.5 percent a year ago; operating margin of 11.6 percent on a U.S.
GAAP basis, down from 13.5 percent a year ago
-- Full year 2012 operating margin of 13.5 percent on a performance basis,
up from 13.4 percent a year ago; operating margin of 13.1 percent on a
U.S. GAAP basis, down from 13.2 percent a year ago
-- Q4 2012 diluted EPS of $1.08 on a performance basis, down from $1.21 a
year ago; diluted EPS of $0.93 on a U.S. GAAP basis, down from $1.04 a
year ago
-- Full year 2012 diluted EPS of $4.46 on a performance basis, down from
$4.73 a year ago; diluted EPS of $4.62 on a U.S. GAAP basis, down from
$5.19 a year ago
-- Full year 2012, WABCO generated $358.3 million in net cash from
operating activities and $274.3 million of free cash flow, excluding
payments of $16.5 million for streamlining and separation activities.
This results in a conversion rate of 94 percent of performance net
income attributable to the company
-- Provides guidance for full year 2013 sales growth to range between 2
percent and 7 percent in local currencies, full year 2013 diluted EPS on
a performance basis to range from $4.30 to $4.80 and full year 2013
diluted EPS on a U.S. GAAP basis to range from $7.26 to $7.76

WABCO reported Q4 2012 sales of $596.5 million, down 7.9 percent in local currencies from a year ago and down 11.2 percent in U.S. dollars.

"As previously stated, markets across all regions continued to be uncertain and unstable as global truck and bus production in Q4 2012 declined 12 percent year on year," said Jacques Esculier, WABCO Chairman and Chief Executive Officer.

"Western Europe, our largest market, continued its downturn as new truck and bus builds declined 15 percent versus a year ago. We also faced an accelerated downturn in India during this quarter as local truck and bus production contracted 26 percent year on year. However, WABCO still managed to outperform the global market in Q4 2012, including a superb performance in aftermarket sales, which grew by 9 percent compared to a year ago," said Esculier.

WABCO reported Q4 2012 performance operating income of $75.0 million versus $90.5 million a year ago, and operating income was $69.0 million on a U.S. GAAP basis versus $90.5 million a year ago. Performance operating margin for Q4 2012 was 12.6 percent, down from 13.5 percent a year ago, and operating margin was 11.6 percent on a U.S. GAAP basis, down from 13.5 percent a year ago.

For Q4 2012, WABCO reported performance net income attributable to the company of $69.6 million or $1.08 per diluted share versus $80.7 million or $1.21 per diluted share a year ago, and Q4 2012 U.S. GAAP net income attributable to the company of $59.7 million or $0.93 per diluted share versus $69.8 million or $1.04 per diluted share a year ago.

During Q4 2012, WABCO generated $76.3 million in net cash from operating activities, resulting in free cash flow of $43.1 million. Excluding payments of $5.8 million for streamlining and separation activities, free cash flow was $48.9 million for the quarter.

"Consistent with many previous quarters, WABCO's Operating System, one of our industry's most advanced management environments, continued to yield high levels of productivity in Q4 2012," said Esculier. "In total, we generated $16.3 million of materials and conversion productivity for the quarter as we efficiently flexed capacity to address changes in market demand, with gross materials productivity at 5.4 percent of total materials cost, and we delivered conversion productivity at 5.9 percent."

For full year 2012, WABCO reported sales of $2,477.4 million, down 4.8 percent in local currencies from a year ago and down 11.3 percent in U.S. dollars, reflecting the industry's downturn in key markets.

"While global truck and bus production declined 10 percent year on year, WABCO stayed on course and outperformed the market for yet another year," said Esculier. "For full year 2012, WABCO also increased global aftermarket sales by 5 percent, reaching a new record for annual aftermarket revenues on a currency adjusted basis."

WABCO reported full year 2012 performance operating income of $335.6 million versus $375.1 million a year ago, and operating income was $324.5 million on a U.S. GAAP basis versus $369.9 million a year ago. Full year 2012 performance operating margin was 13.5 percent, up from 13.4 percent a year ago, and operating margin was 13.1 percent on a U.S. GAAP basis, down from 13.2 percent a year ago.

"For full year 2012, WABCO's operating margin of 13.5 percent on a performance basis delivered another year of record profitability, further demonstrating WABCO's ability to anticipate and respond to the sudden industry downturn," said Esculier.

WABCO reported full year 2012 performance net income attributable to the company of $291.6 million or $4.46 per diluted share versus $325.7 million or $4.73 per diluted share a year ago, and full year 2012 U.S. GAAP net income attributable to the company of $302.0 million or $4.62 per diluted share versus $357.0 million or $5.19 per diluted share a year ago.

"Throughout 2012, WABCO's Operating System powered us toward new productivity records and enabled our fast and flexible responses to significant market changes quarter after quarter," said Esculier. "In total, it delivered $66.6 million of materials and conversion productivity, resulting in an all-time record. Gross materials productivity in 2012 represented 5.3 percent of total materials cost. We also delivered another record for conversion productivity in 2012, reaching 6.2 percent for the year."

WABCO generated $358.3 million in net cash from operating activities during full year 2012, resulting in free cash flow of $257.8 million. Excluding payments of $16.5 million for streamlining and separation activities, free cash flow was $274.3 million, which is a conversion rate of 94 percent of performance net income attributable to the company during full year 2012.

Since June 2011, WABCO has repurchased 7,051,349 shares for $379.4 million in open market transactions as of December 31, 2012. As previously disclosed, WABCO is authorized to repurchase up to $420.6 million of additional shares through December 31, 2014.

Recent Highlights

In January 2013, WABCO announced that it has won contracts to provide anti-lock braking systems (ABS) to 6 of Brazil's leading trailer manufacturers. Together, these companies supply around 45 percent of the new trailers manufactured in Brazil, the single largest market in South America. As of January 2013, new ABS legislation took effect in Brazil to further increase vehicle and road safety.

The Meritor WABCO joint venture in North America said in January 2013 that it has been named the standard position steer-axle service brake-chamber supplier for all Daimler Trucks North America air brake vehicles. WABCO's service brake-chambers allow reduced cost of ownership and increased payload capacity.

Also in January 2013, Meritor WABCO said that Schneider National has ordered more than 2,500 units of its OnGuard(TM) collision safety system as standard equipment for its new class 8 trucks. Schneider National operates one of the leading truckload, intermodal and transport fleets in North America. OnGuard is the first collision mitigation system introduced in North America, and as of December 2012, nearly 30,000 OnGuard systems have been sold there.

In January 2013, WABCO reported that it has been honored with 9 awards for superior performance in 2012 by 7 of China's leading commercial vehicle manufacturers, including Baotou Bei Ben Heavy Duty Truck, Beiqi Foton Motor, FAW Jeifang Automotive and China National Heavy Duty Truck Group.

Meritor WABCO reported in Q4 2012 that it received the prestigious 2012 Platinum Supplier Award from Wabash National for excellence in supply chain performance, delivery, quality, cost effectiveness and innovation. Wabash National is a leading trailer manufacturer in North America. Meritor WABCO is the only supplier to win this award for five consecutive years.

Based on our current best estimates of future market conditions, WABCO's guidance for 2013 indicates sales growth to range between 2 and 7 percent in local currencies for 2013, performance operating margin to range from 12.3 to 13.3 percent, and operating margin on a U.S. GAAP basis to range from 11.7 to 12.7 percent, resulting in diluted earnings per share on a performance basis to range from $4.30 to $4.80.

Taking into account an anticipated release in Q4 2013 of an estimated $200 million valuation allowance associated with the tax benefit on net operating loss carry-forwards partially offset by streamlining and separation related expenses throughout the year, diluted earnings per share are estimated to range from $7.26 to $7.76 on a U.S. GAAP basis.

WABCO expects in 2013 to convert between 80 and 90 percent of its net income attributable to the company into free cash flow, excluding payments associated with streamlining and separation activities.

"2012 was another year in which WABCO demonstrated differentiation through its performance as a global leader in the commercial vehicle industry," said Esculier. "Although we are facing prevailing market uncertainty in 2013, we remain confident in our ability to continue to deliver outstanding value for WABCO's shareowners. As we stay fully focused on driving outperformance through increasing the adoption of WABCO technologies globally, we will maintain our flexibility to efficiently respond to market conditions."

Conference Call

WABCO Chairman and Chief Executive Officer Jacques Esculier and Chief Financial Officer Ulrich Michel will discuss WABCO's results and outlook on a conference call at 9 a.m. Eastern Time today. It will be webcast at www.wabco-auto.com where the press release and financial information will be available under "WABCO Q4 and Full Year 2012 Results."

The call is also accessible by telephone in listen only mode. Dial-in number is +1 408 940 3818 and U.S. toll-free dial-in number is 877 844 0834.

A replay of the call will be available from 12:00 Noon Eastern Time on February 15 until midnight February 22, 2013. Replay dial-in number is +1 404 537 3406 and U.S. toll-free dial-in number is 855 859 2056. Pass code is 79385178.

About WABCO

WABCO (NYSE:WBC) is a leading global supplier of technologies and control systems for the safety and efficiency of commercial vehicles. Founded over 140 years ago, WABCO continues to pioneer breakthrough electronic, mechanical and mechatronic technologies for braking, stability and transmission automation systems supplied to the world's leading commercial truck, bus and trailer manufacturers. With sales of $2.5 billion in 2012, WABCO is headquartered in Brussels, Belgium. For more information, visit www.wabco-auto.com.

Forward-Looking Statements

This document contains certain "forward-looking statements" as defined by the Private Securities Litigation Reform Act of 1995 that are based on management's good faith expectations and beliefs concerning future developments. Statements preceded by, followed by or that otherwise include the words "believes," "expects," "anticipates," "strategies," "prospects," "intends," "projects," "estimates," "plans," "may increase," "may fluctuate," and similar expressions or future or conditional verbs such as "will," "should," "would," "may" and "could" are generally forward looking in nature and not historical facts. Actual results may differ materially from these expectations as a result of many factors. These factors include, but are not limited to, the actual level of commercial vehicle production in our end markets, adverse developments in the business of our key customers, pricing changes to our supplies or products, and the other risks and uncertainties described in the "Risk Factors" section and the "Information Concerning Forward Looking Statements" section of WABCO's Form 10-K, as well as in the "Management's Discussion and Analysis of Financial Condition and Results of Operations - Information Concerning Forward Looking Statements" section of WABCO's Form 10-Q Quarterly Reports. WABCO does not undertake any obligation to update such forward-looking statements. All market and industry data are based on company estimates.

Non-GAAP Financial Measures

To facilitate the understanding of Q4 and full year 2012 results, several tables follow this news release. Sales excluding the effects of foreign exchange, incremental gross and operating margin and EBIT are non-GAAP financial measures. Additionally, operating income, EBIT, net income attributable to the company and net income attributable to the company per diluted share on a "performance basis" are non-GAAP financial measures that exclude separation and streamlining items, the one-time impact from an adjustment to the UK pension plan, and discrete and other one-time tax items, as applicable. Free cash flow presents our net cash provided by operating activities less net cash used for purchases of property, plant, equipment, and computer software. These measures should be considered in addition to, not as a substitute for, GAAP measures. Management believes that presenting these non-GAAP measures is useful to shareholders because it enhances their understanding of how management assesses the operating performance of the company's business. Certain non-GAAP measures may be used, in part, to determine incentive compensation for current employees.

Note: The presentation of the performance measures above are not in conformity with generally accepted accounting principles (GAAP). These measures may not be comparable to similar measures of other companies as not all companies calculate these measures in the same manner.

Note: The presentation of the performance measures above are not in conformity with generally accepted accounting principles (GAAP). These measures may not be comparable to similar measures of other companies as not all companies calculate these measures in the same manner.

Note: This statement reconciles net cash provided by operating activities to free cash flow. Management uses free cash flow, which is not defined by US GAAP, to measure the Company's operating performance. Free cash flow is also one of the several measures used to determine incentive compensation for certain employees.

Note: The presentation of performance net income and performance net income per diluted common share is not in conformity with generally accepted accounting principles (GAAP). These measures may not be comparable to similar measures of other companies as not all companies calculate these measures in the same manner.